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No, You can't retire rich at 30 if you sell your startup

tonywright.com

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Re: No, You can't retire rich at 30 if you sell your startup

#181

Post by mattmaroon »

While the math isn't glaringly erroneous, the assumptions used are.

For one thing, it's looking at nearly risk-free rates of return while assuming a long-term horizon. (30 year treasuries are paying 3.65% now.) Sure it's easy to point out during the worst financial crisis of the last 70+ years that the S&P has fared poorly over the last decade. However even now, in a time of relative disaster, over the last 50 years (the timeline we're looking at if we're retiring at 30 and dieing at 80) it's returned about 8.5%. (That's using this chart http://moneycentral.msn.com/investor/charts/chartdl.aspx?sym... and a little math). Average since the Great Depression is more like 10%. While many people now believe it will be lower going forward even the worst skeptics are talkinng more like 7-8%. I don't know that I buy it because, as the old joke goes, economists have predicted 9 out of the last 5 recessions, but even if so that's a vastly different picture than 4%, and excludes the fact that there are many investments with higher ROIs to be found readily if you're either willing to do more work or accept more risk.

That's not to mention, FU money doesn't have to mean a jet-setting lifestyle. It just means enough to do what you want. One could live very happily in most of America spending $100k/yr, including their home. That's actually quite a bit when you consider that you're not paying income taxes, just capital gains. It's like making $150k, or 3x the national average. With $4m this is achievable even at money market rates.

Re: No, You can't retire rich at 30 if you sell your startup

#182

Post by sabat »

gamble wrote: post #111
sabat wrote: post #9

As someone who just witnessed two non-founders of a startup that had a recent IPO become wealthy enough to retire -- B.S. You can do it with stock options (even without an IPO). Tony seems to be making a binary argument: it's not guaranteed, so you may as well give up on the idea. Of course I'm doing it for the money. I'm also doing it for other reasons. Did someone die and tell Tony Wright that the world is only com…

You can also get your FU money playing the lottery. It's probably a better deal overall, since the odds are about the same and you don't have to pull any all-nighters to win the lotto.

The odds are nowhere near the same. Besides the raw odds -- obviously much better than the zillion-to-one odds on the lottery -- you can actually affect the outcome of your startup to some degree.

Re: No, You can't retire rich at 30 if you sell your startup

#183

Post by GFischer »

revorad wrote: post #145
GFischer wrote: post #28

Earlier quoted context omitted.

I live on U$ 12,000 a year* in a Latin American country (Uruguay), but it isn't a good enough amount to retire on. U$ 30,000 is doable, but not millionaire-ish. You could live quite comfortably and with housemaids and eating out often, but forget about a (good) car or high-end electronic toys (unless you bring them with you from abroad). There are some nice places to retire, but I'm not sure if you wouldn't find it b…

wow you pay 50% taxes on $24k in Uruguay?

It's not really all taxes,more like "deductions". Out of my typical paycheck

- 17.5% is withdrawn for retirements savings/pension funds

- the first 600 dollars are untaxed, then bracketed 10%, 15%, 20% and 22%. I pay up to 22% tax bracket, 25% on the extra holidays check. (in all, it's about 12% of my pre-deductions income except in Christmas where it shoots up to 20% or so)(1)

- 6% goes to healthcare (it's mandatory), I pay an extra 6% on top of that but that was entirely my option (for better healthcare).

- some miscellaneous taxes (a reconversion fund for workers and others)

Well that makes out like 40%, not 50%, but you get the idea :)

After that, we have a 22% Value Added Tax on everything, and a minimum of 60% taxes on imports, but those are "optional" (optional, that is, if you don't eat or buy anything - and it's regressive taxation)

(1)Some companies cheat the DGI (IRS equivalent) by under-reporting employee's salaries (typically so they fall in a lower income bracket, or untaxed income bracket), and then pay a slightly higher than average market salary overall. Of course, that means you can't go to the government and complain if they fail to pay you, and it goes back to bite you when you retire (retirement plans are tied to how much you were paid when working).

Re: No, You can't retire rich at 30 if you sell your startup

#184

Post by datapimp »

nostrademons wrote: post #128
alister wrote: post #108

Earlier quoted context omitted.

Can we conclude that this is the wistful daydream equivalent of the "Maserati Problem" I'll go out on a limb and say that even normal retirement planning (50 years into the future) is a Maserati Problem. Everybody that makes very long-term projections about money -- whether it's the gloomy "interest on $4m won't last 40 years" variety to the rosy "save $300 a month and the compound interest will make you a millionair…

"There should be some trillionaires walking around whose ancestors started saving in the Renaissance when modern banking began -- but there aren't." Carlisle Cullen. ;-) Anyway - this is a really good point, but I'll point out something else. Most of the wealthy would-be trillionaires whose fortunes got wiped out passed down another inheritance: their genes. Those same disasters that wipe out the savings of the rich…

I'd like to see a source for this. It seems counter-intuitive. A lot of the peasantry were sent to the United States as indentured servants. Most of the white poor land working classes from 17th century on. And it would be consistent with birth rates everywhere else in the agricultural world, that these people had more offspring than the wealthy. So. It just doesn't seem that this would be correct.

That being said. What we call 'The Middle Class' in the United States is kind of deceiving. Class can't simply be a function of how much cash income you bring in a year. Class has more to do with where that income comes from.

Those of us trading our time in exchange for money are working class, even if ( in the rarer case ) it is a greater dollar amount from a person whose primary source of income is the buying low, and selling high of commodities... such as, human labor, or pork bellies... and accumulating and reinvesting the difference.

Re: No, You can't retire rich at 30 if you sell your startup

#185

Post by smeatish »

elai wrote: post #167
cageface wrote: post #147

Earlier quoted context omitted.

That's exactly why I think trying to predict what the world is going to be like in 40 years is just about impossible. The only thing you can say with much confidence is that it's likely to be very different from the way it is today.

It will also stay very similar. The outline of life in the 1970s vs 2010 is still fairly similar. Drive around in cars, live in a house, take the subway, read the newspaper, watch tv, go to the movie theatre, buy food at a grocery store, call people on a landline, plug stuff into the wall, use your fridge and hair drier, drive around in your RV, fly an airplane at supersonic speeds, rent an apartment, have a family r…

"fly an airplane at supersonic speeds"

We consumers actually don't do that anymore: http://en.wikipedia.org/wiki/Concorde

Re: No, You can't retire rich at 30 if you sell your startup

#186

Post by gamble »

sabat wrote: post #182
gamble wrote: post #111

Earlier quoted context omitted.

You can also get your FU money playing the lottery. It's probably a better deal overall, since the odds are about the same and you don't have to pull any all-nighters to win the lotto.

The odds are nowhere near the same. Besides the raw odds -- obviously much better than the zillion-to-one odds on the lottery -- you can actually affect the outcome of your startup to some degree.

As an employee, you start out with such a small grant and have so little control over vesting conditions and dilution that participating in a liquidity event to that degree is essentially an act of charity on the part of the investors.

Re: No, You can't retire rich at 30 if you sell your startup

#187

Post by jshen »

nostrademons wrote: post #123
jshen wrote: post #112

Earlier quoted context omitted.

yes, but I live in L.A. and I'm sure it's different in most parts of the country. I make way more money than my parents or grandparents, even when adjusted for inflation, but I live in a much smaller place than they did.

I'm curious - do you live in a way smaller space than your parents did when you grew up , or when they were your age ? When I compare my current living space with the house I grew up in, it's significantly smaller. However, my parents were over 40 years old by the time I have my first memories. They'd been saving for close to 20 years to afford that place, while I've been saving for maybe 5 years. When my mom was my…

I'm not a 20-something.

Re: No, You can't retire rich at 30 if you sell your startup

#188

Post by tokenadult »

jerf wrote: post #174
achompas wrote: post #114

Earlier quoted context omitted.

Right. People are going crazy over the $500k number 40 years out but, in real dollars, that could easily convert to a middle-class wage today.

Actually, one of my (many) issues with political discourse today is that thanks to inflations, "the rich" has been defined down brutally over the past 30 to 40 years. Anyone currently making $250/year, yeah, if they're hurting it's their own damn fault for overreaching, but that is very rapidly becoming merely upper middle class. Meanwhile, neither our legal/tax nor our social definitions of "rich" are being updated…

And yet many of the things that average people enjoy today could not be obtained with any amount of money when my grandfather was alive. Where I live, today, an annual income of U.S.$250,000 is very comfortable indeed (and rather rare).

Re: No, You can't retire rich at 30 if you sell your startup

#189

Post by nl »

pchristensen wrote: post #126
yummyfajitas wrote: post #110

Earlier quoted context omitted.

No, by my logic those living in poverty in 2010 will be living a life that the 1970's would describe as middle class. Fun fact: the bottom 11% in 1970 didn't have flush toilets. http://www.digitalhistory.uh.edu/database/article_display.cf... In 2001, the bottom 7-8% don't have dishwashers, which were generally considered a luxury item in the 1970's. Go read this article, describing the material conditions of the poor…

"what items did the middle class of 1970 have that the poor of 2001 lack?" They're not items, but I'd say hope, stability, confidence, status, etc.

They're not items, but I'd say hope, stability, confidence, status, etc.

Really? In the US? In the 70's? This was at the end of the Vietnam War, during the oil crisis, remember?

As a random example consumer confidence at the lowest point during the financial crisis was still higher than it was in 1973 (during the Oil Crisis): http://useconomy.about.com/b/2008/04/01/consumer-pessimism-s...

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